‘Value-Based’ Healthcare Gains Ground in New Jersey

In an effort to improve care and curb escalating costs, a new approach to treating patients stresses quality over quantity

For a growing number of patients in New Jersey, disease management doesn’t mean just medication, but it could also involve a change in diet. A recommendation for surgery could require strength training in advance.

And for more and more Garden State doctors, a portion of their payments is tied to the long-term health of their patients and financial success depends in part on their ability to work across traditional practice lines to coordinate with specialists, nutritionists, and physical therapists.

These models are driven in part by an expanding interest nationwide in value-based healthcare, in which reimbursements are tied to the clinical outcomes of patients in an effort to improve care and curb escalating costs. Instead of making money on patient volume, physicians are paid for coordinating care around a specific condition or treatment and, in some cases, they can share in savings that result from keeping patients healthier.

In New Jersey, where the price of healthcare is among the highest nationwide, this is a growing trend as insurance companies work with an expanding circle of physicians to cover more and more patients through value-based care.

According to a report from the Centers for Medicare and Medicaid Services’ Health Care Payment and Learning Action Network, nearly 25 percent of all healthcare payments nationwide were tied to value-based care and other “alternative” systems in 2015. It is anticipated this will rise to more than two-thirds this year. Medicare alone — which spent more than $630 billion last year — aims to send 30 percent of its dollars through alternative systems this year, rising to half of all spending by 2018.

In New Jersey, Horizon Blue Cross Blue Shield, the state’s largest insurance provider with some 3.8 million patients, already directs 60 percent of its medical spending to providers that have value-based arrangements, the company said. Aetna spends nearly two-thirds of its dollars on such programs here and is aiming for 75 percent by 2020, according to representatives. And UnitedHealthcare pays more than half the claims for its employee and individual plans in the state to providers in value-based arrangements, it said.

For decades, both government insurance programs like Medicare and Medicaid and private payers have reimbursed healthcare providers for each service based on a little-understood — and increasingly controversial — rate system designed to reflect how much time it took a doctor to diagnose and treat a particular condition. But recent years have seen a growing number of experiments designed to shift this system to reward physicians for keeping patients healthy, limiting the impact of a disease, or increasing the success of a surgical procedure.

In the newer model, “the physician is rewarded for the outcome, for the health level of the patient — not for the number of people coming through the doors,” said Edgar Miranda, vice-president of operations for Cigna, which covers some 40 percent of its New Jersey patients through value-based arrangements. “It’s optimizing the system,” he continued, “and ultimately shifting where healthcare is delivered to the home, the community and at work.”

“This is fundamentally changing physicians' operating model,” Miranda said, “and the payment mechanism starts to become secondary to how they deliver care.”

At Horizon, value-based care started to come into focus in 2010, when the company announced its first Patient Centered Medical Homes, an effort to better coordinate primary care delivery. Hospitals were included next, through a model that became the Accountable Care Organization (ACO) program outlined in the federal Affordable Care Act. (While ACOs and other value-based models gained footing under the Affordable Care Act, which President-elect Donald Trump had pledged to repeal, the trend is not limited to the 2014 law and experts have suggested these programs are likely to continue to expand regardless of the fate of the federal law.)

In 2012, Horizon added its Episodes of Care program to tackle higher-cost specialty treatments. The company now operates over a dozen “episode” programs that pay doctors to track and organize care for patients dealing with certain cancers, joint replacements, heart failure and other conditions. The company recently announced its first model designed to integrate mental healthcare with “physical” treatments, built around Crohn’s Disease.

Dr. Stephen Zabinski, an orthopedic surgeon based in Somers Point who was among the physicians who pioneered Horizon’s first episodes program, said it has taken physicians — and patients —time to get comfortable with value-based arrangements. Instead of lingering in the hospital for days following a knee or hip replacement, with machines to work the joint and medication to dull the pain, he said patients are now engaged in a pre-operation routine that often includes strength training, diet advice and a home assessment to identify and address stairs or other barriers to safe recovery. At first they may feel short-changed, but they usually come to appreciate the positive results, he said.

“The reality is that [Episodes of Care] forced us to look at things that matter for the patient and optimize them and put them at the center,” Zabinski said. “And reducing complications is the most effective way to reduce costs.”

“It’s radically different in a better way,” he added. “And it ends up improving the patient experience.”

Horizon now engages more than 4,000 doctors in value-based contracts of some kind. According to data from 2015, these programs helped patients covered by the company’s plans avoid some 3,500 emergency room visits and generated nearly $60 million in savings that was shared among doctors and hospitals.

Lili Brillstein, director of Horizon’s episodes programs, said that in addition to benefitting the patient, the physician and the payer, these collaborations also support a significant “fourth pillar” — the relationship between the payer and the provider. “It’s important for the program to be extremely collaborative,” she said. “We recognize the [physician] partners as the pinnacle experts who are delivering the care.”

This connection has not always been so positive, Brillstein said. “It certainly had been a very adversarial relationship” in the past, she explained, as doctors and insurance companies squared off over payments and procedures, “and the patient wasn’t in the mix.” But, with the episodes programs, providers can focus on ways to improve outcomes without worrying about recruiting new patients just to get paid. “We’re at the beginning of an evolution and our goal is to continue to partner with them,” she said.

Officials at UnitedHealthcare have been exploring value-based arrangements for nearly two decades, starting with bundled payments around organ transplant procedures, explained company vice-president Michele Nielson. The company now contracts with more than a dozen ACO groups that include patients in Medicare, Medicaid and employee-sponsored plans. While some categories of insurance coverage are more integrated with value-based care than others, Nielson said United is looking to have 80 percent of all contracts include a “performance-based component” in the coming years.

“The provider community is really telling us that’s where they want to go,” Nielson said. “We continue to look for additional opportunities in the marketplace. The challenge is to find the right [provider] partner,” she said, “and it can still be a difficult relationship.”